In a major step, the Securities and Exchange Commission (SEC) yesterday decided to let lenders take decisions on share credit and perform other tasks related to margin loan disbursement and maintenance.

The merchant banks and stockbrokers, who provide margin loans for share purchase, will however have to report to the SEC on credit disbursement and maintenance on a monthly basis so that the regulator can monitor.

Previously, the SEC had fixed the loan ratio and the lenders provided credit in line with the limit, but the regulator was facing strong criticism from experts and market intermediaries for its role in share credit.

In another move, the SEC allowed stock exchanges to take decisions on some other issues such as transfer of securities from one trading market to another, and suspension of stock trading. Earlier, the bourses acted only on

instructions from the SEC.

The decisions came from SEC's meeting with merchant banks and the twin bourses. The commission's Chairman Ziaul Haque Khondker presided over the meeting, attended by presidents and chief executive officers of Dhaka and Chittagong stock exchanges, president of Bangladesh Merchant Banker's Association (BMBA), and three executive directors of the SEC.

However, the SEC handed over a task to the BMBA to make a 'guideline' on margin loan and asked the association to submit it by February 10 to the commission for regulatory approval, said Saifur Rahman, an executive director of the SEC.

"While preparing the guideline, some issues will have to be considered such as valuation method of securities in a client's portfolio, highest limit or ratio of margin loan, certain procedures on margin call or forced sell and considering the existing securities rules and regulations,"

he said in a press briefing.

Once the margin loan ratio is fixed, the limit can be reset after six months. "The revised loan ratio will come into effect from the first trading day of every January or July," Rahman said.

He said after the new decisions takes effect, every merchant bank will have to submit reports on previous month's loan disbursement and maintenance, while the stockbrokers will have to submit similar reports through their exchanges.

On the bourses responsibilities, he said, the stock exchanges can shift trading of securities from public market to spot market by their own decision, and can also stop trading of stocks considering the price movement or the market situation.

"They only have to inform the commission after taking such a decision," the SEC executive director said, adding: "It will help the stock exchanges to play their role as statutory regulatory organisation."